from the oops dept

We just wrote about Hadopi's back slapping report about how much it had reduced "piracy." We noted that what was really telling was the fact that revenue was still declining. However, as more people look at the details of the Hadopi report, even the numbers they provide are looking less and less credible. Monica Horten from IPtegrity looks at a few different sources that raise serious questions about the Hadopi report. What the analysis shows is that P2P file sharing is still increasing in France. The "decline" is not in absolute numbers, but in relative numbers, compared to other sources -- such as streaming. And streaming has gone up quite a bit. An analysis in the French publication Le Figaro highlights how P2P and streaming appear to have basically flip flopped:

On top of that, France Telecom, who has said that P2P use continues to grow, has also noted that it saw "a marked increase in levels of encrypted traffic since the Hadopi notice-sending began," suggesting that there's plenty of file sharing going on via encrypted channels that Hadopi simply can't track.

Furthermore, Horten points to a Numerama report that highlights the fact that Hadopi's numbers come from the IFPI and ALPA. ALPA is a French anti-piracy organization. In other words, organizations who have a long history of fudging their own numbers. You would think, if the data was really showed that Hadopi was having an impact, its numbers would be a lot stronger.

from the just-saying... dept

Hadopi, the organization set up in France to administer its three strikes law (kicking people offline based on accusations -- not convictions -- of copyright infringement), has put out a new report looking at how things are going 17 months after its creation. It highlights a bunch of benchmarks to suggest that infringement is dropping and that people are no longer visiting file sharing sites. The report links to a bunch of reports showing a decline in traffic to those sites. They even include some data on traffic to sites like Megaupload -- despite the fact that cyberlocker downloads are not covered by Hadopi. However, as the TorrentFreak link above points out, it's worth noting that even if this is true, it hasn't turned into revenue:

For more than a decade the entertainment industry has claimed that digital piracy is the main cause for the gradual decline in revenues. So if piracy is down massively in France, one would expect that the revenues are soaring, right? But they’re not.

If we look at the French music industry we see that overall revenues were down by 3.9 percent in 2011.

Likewise, the French movie industry is still going through a rough period with revenues dropping 2.7 percent in 2011. Ironically, an industry insider even blamed online piracy for this drop.

To sum it up. in 2011 online piracy was slashed in half according to the Hadopi report, but despite this unprecedented decline the movie and music industries managed to generate less revenue than in 2010. If we follow the logic employed by the anti-piracy lobby during the past decade, this means that piracy is actually boosting sales.

Now, we've been pointing out for years that spending so much time and resources on reducing infringement is pretty pointless if it doesn't lead to an increase in revenue. And it appears that such a revenue increase isn't magically appearing (just as we predicted). Now, of course, there was that report that was trumpeted by Hadopi supporters claiming that there was an increase in iTunes sales, but the details showed that was correlated to new releases in Apple products (and Christmas) more than three strikes. And this new report actually shows just how little the iTunes boost really was. It has a chart showing different music services and how their usage has changed in France during Hadopi's existence:

What you see... is kind of a mixed bag. iTunes usage increased just slightly -- but not that much at all, considering the numbers the reports brags about concerning decreases in infringement. You do see a big jump on two services: Beezik and Spotify, both of which allow for the ability to listen to music for free. You also see decreases in traffic to Deezer and Universal Music. If the industry was right that reducing piracy would magically boost all of these alternatives, there would certainly be a more noticeable trend. This really raises significant questions as to what's the point of all of this. Implementing Hadopi cost French taxpayers quite a lot of money and if it's not actually helping the industry, what good is it?

It just comes back to that same important question: which is more important? Reducing infringement or increasing revenue? The industry has acted for years as if the former is the most important (and when we ask this question, they insist that the former would lead to the latter). Yet, now the evidence doesn't appear to support that. If anything, Hadopi's report, while patting itself on the back for reducing infringement, really highlights just how useless Hadopi has been and what a waste it's been for both French taxpayers and the French entertainment industry that has supported it so strongly.

from the equal-before-the-law dept

The governmental body that oversees France's "three-strikes" law, HADOPI, has already been caught once infringing on the copyright of others -- by using a logo designed with unlicensed fonts. Now it's been spotted using photographs without respecting the so-called "moral rights" of the photographer, which include the right to attribution (French original), absent on HADOPI's site. Such moral rights are taken very seriously in France, where they are automatic, perpetual and cannot be waived (unlike in some other jurisdictions, such as the United Kingdom.)

As with the earlier slip, the current example shows just how easy it is for someone to infringe on copyrights through error or oversight. Of course, HADOPI doesn't accept either excuse when it's a matter of sending out its famous warnings, or disconnecting people from the Net. So, in the spirit of fairness, it would be unjust to grant itself any leeway either.

That makes two strikes against it so far; let's hope it's more careful in the future, or it will obviously be forced to cut off its own Internet connection to set an example to the rest of France.

from the yeah-that'll-work dept

As we reported last week, the French agency in charge of scaring internet users with the threat of potentially losing their internet connections based on accusations (not convictions) of copyright infringement has finally started passing on "third strike" notices to prosecutors, to see if they choose to start kicking people offline. The NY Times has an article discussing this latest step in a manner that repeats a bunch of the record labels' favorite talking points, and seems to accept a number of the industry's claims without question (a practice that is becoming way too common in the pages of the NY Times lately).

Studies show that the appeal of piracy has waned in France since the so-called three-strikes law, hailed by the music and movie industries and hated by advocates of an open Internet, went into effect. Digital sales, which were slow to get started in France, are growing. Music industry revenues are starting to stabilize.

These are all stated as if it's clear that the three things are connected, even though the evidence there is lacking.

“I think more and more French people understand that artists should get paid for their work,” said Pascal Negre, president of Universal Music France. “I think everybody has a friend who has received an e-mail. This creates a buzz. There is an educational effect.”

This is wishful thinking on the part of Negre. Multiple studies have shown that piracy is almost never an educational issue. It's not about people needing to "understand that artists should get paid for their work." As we've seen time and time again, if you give fans a good reason to buy, fans have no problem spending (and spending big) on artists. As for "the buzz" created by Hadopi emails, from what the various reports we've heard out of France are saying, much of that "buzz" is around how to make use of VPNs and other tools... as well as how to use cyberlockers and such tools that are not (yet) covered by Hadopi.

Eric Walter, the secretary general of Hadopi, said that the relatively low number of third-stage offenders showed that the system had succeeded.

“Our work is to explain to people why piracy is a bad thing and why they should stop,” he said during an interview in the agency’s nondescript headquarters behind the Montparnasse train station in Paris. “When the people understand that, they stop. Of course, some people don’t want to understand. Then we have to transfer their dossiers to the justice system.”

Again, this assumes that piracy is merely an educational issue, and people would just stop infringing if they only knew that it was illegal. Yet there's little evidence to support that claim. Most kids understand that it's illegal, but it doesn't make a difference to them.

A report commissioned by Hadopi, which has a budget of €11 million and employs 70 people, showed a sharp decline in file-sharing since the system was put in place.

A separate study by researchers at Wellesley College in Massachusetts and Carnegie Mellon University in Pittsburgh suggests that Hadopi has given a lift to legal downloads via the Apple iTunes music store. Since the spring of 2009, when the debate over the measure was raging, through mid-2011, iTunes sales rose much more strongly in France than in other European countries.

Oddly, the NY Times fails to name the study or its authors, or link to the actual study. But we will. It's The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France, by Brett Danaher, Michael D. Smith, Rahul Telang and Siwen Chen. If this study sounds familiar, it's because it's the one the IFPI has been hyping in support of similar laws. It's also the report that isn't nearly as strong as the IFPI (or the NY Times) insists and has been pretty thoroughly debunked for anyone who uses it to claim that Hadopi's notice system educated people into buying from iTunes. As some have pointed out, the actual data shows the "change" in sales behavior (relative to other countries) happened way before Hadopi came into effect. And... when Hadopi actually started sending out its notices? No noticeable impact.

That kind of takes the wind out of the sales of the two folks quoted above who insist that it's the educational nature of the notices that leads to the increase in sales. And, as we reported last month, when Le Monde took the same data and plotted it against announcements about new iPhones or Christmas, it found a much stronger connection, suggesting the increase in sales had little to do with Hadopi and much more to do with more people having iPhones.

These are the kinds of things that you would think the NY Times might note. But it does not.

There is other evidence in Europe that tougher online copyright enforcement can lift media industry revenues, at least briefly. Music sales rose 10 percent in Sweden in 2009, for example, after the country tightened up its copyright laws, bringing previously lax standards into line with E.U. norms.

Mr. Negre, at Universal Music, said it was probably no coincidence that Sweden and France had produced the two big European success stories in the legitimate digital music market: the streaming services Spotify and Deezer. These companies — the former was founded in Sweden, the latter in France — resemble pirate sites in that they give users access to millions of songs free, at least for their basic services.

This may be the most ridiculous claim of all. First off, Deezer, in France, launched back in 2007, or about four years before Hadopi went into effect. Similarly, Spotify launched in Sweden in 2008. The IPRED law in Sweden? Went into effect in 2009. In other words, both of these services pre-dated the laws, rather than post-dated them as Negre from Universal Music implies. And, perhaps that also has a lot more to do with the rebound of some parts of the recording business in both of those countries. After finally allowing services to offer fans what they wanted, should it be any surprise that they actually are happy with that? Oh, as for the claim that IPRED reduced file sharing in Sweden? Reports had the amount of sharing traffic surprassing pre-IPRED numbers within months. It may have suppressed infringement briefly, but not for long. Of course, it's worth noting that much of the effort has been focused on movies. With music, thanks to Spotify, the reasons to infringe are almost gone.

And, really, that should be the key lesson we're talking about here. If the industry stops meddling and starts letting companies treat their customers right and provide them with more and better ways to consume, they will do so. Playing wac-a-mole, kicking people offline and scaring them is no way to build a long term business.

There are two other really interesting bits later down in the article. The first is that Sarkozy's opponents in the upcoming election all seem to want to dump Hadopi, demonstrating just how unpopular the law really is in France. Then there's the fact that Hadopi appears to have been caught sending notices to the wrong people:

Mr. Thollot argued that someone had pirated his log-on to a nationwide Wi-Fi network and downloaded the material while he was in class. After interviewing him, Hadopi dropped his case.

“It’s like when someone steals your bank card number,” said Renaud Veeckman, co-founder of SOS Hadopi, an organization that offers legal help to people who have received warnings from the anti-piracy agency. “Are you responsible, or are you the victim?”

SOS Hadopi has worked with five people whose dossiers have reached the third stage, including Mr. Thollot; all five have been cleared before going to court. This suggests that the actual number of cases that have been forwarded to the justice system may be considerably lower than the 165 third-strike offenders cited by Hadopi. Mr. Walter at Hadopi declined to provide a specific figure.

This part especially should raise significant questions about the quality of the information being used. Because, so far, it sounds like a big joke... other than the fact that some people might lose their internet connections over it.

The report also notes that Nicolas Sarkozy, who was the original champion of three strikes plans, is already looking to expand the law to go after cyberlockers rather than just peer-to-peer, as is the case with the current Hadopi plan, apparently. I'm sure, in an effort to support such a move, politicians will push the misleading claim that Hadopi has actually worked, even if the actual data suggests what really worked was wider availability of legitimate services and tools.

from the correlation-is-not-causation dept

The annual Digital Music Report (pdf) of the International Federation for the Phonographic Industry (IFPI) is a curiously conflicted production. On the one hand, it must celebrate "a healthy 8 per cent increase in our digital revenues in 2011 -- the first time the annual growth rate has risen since records began in 2004 "; on the other, it must continue to push the party line about how the industry is being destroyed by piracy.

The IFPI has a stab a reconciling that contradiction, writing: "The truth is that record companies are building a successful digital music business in spite of the environment in which they operate, not because of it." However, it desperately needs some proof of that statement, because otherwise the simplest explanation is that piracy is not a serious problem, and that the recording industry is thriving, just like the rest of the creative industries.

The IFPI probably thinks it has found some proof in the French HADOPI experience, which, according its report, demonstrates that introducing three-strikes measures against unauthorized sharing boosts digital sales.

A new academic study -- The Effect of Graduated Response Anti-Piracy Laws on Music Sales: Evidence from an Event Study in France, by Danaher et al -- has also found evidence that Hadopi has had a positive impact on iTunes sales in France. The authors studied sales of digital singles and album downloads on iTunes from July 2008, before the law was adopted, until six months after the start of notices. They developed an estimate of what French iTunes sales would have looked like in the absence of Hadopi by studying a control group of similar markets.

The analysis found that French iTunes sales saw a significant uplift at exactly the period when awareness of Hadopi was at its highest, in
Spring 2009, when the law was being debated in the National Assembly. This effect was maintained throughout the period studied. French iTunes sales were 22.5 per cent higher for singles and 25 per cent higher for digital albums than they would have been, on average, in the absence of Hadopi.

Taking a look at the study (pdf) provides some details of how the research was carried out:

For this study, we obtained a panel of total weekly iTunes sales units for a number of European countries including France. Our data extend from July 2008 to May 2011, and we observe separately both track unit sales and album unit sales. The data were obtained directly from the four major music labels -- EMI, Sony, Universal, and Warner -- and aggregated to reflect total iTunes sales for the majors.

In an attempt to observe the effect of HADOPI, these sales were compared with a control group of five other European countries that didn't introduce similar legislation: the UK, Italy, Spain, Germany, and Belgium. By looking for differences between these two data sets, the researchers hoped to observe the effects of the three-strikes legislation on sales of digital music, using a Google Trends graph of searches for the word "HADOPI" as a proxy for awareness of that legislation, both before and after it was passed.

The graph of iTunes sales for France clearly diverges from that of the control group, lying consistently above it. The divergence begins around about the time that HADOPI was first presented to the French National Assembly, increases slightly, and then decreases a little after the first warning letters were sent out. From this, the researchers deduce that the discussion around HADOPI caused significantly increased sales of iTunes compared to the control countries:

these estimates indicate that French track sales units rose about 25.5% in the control group after March 1, 2009 but by 48% in France, indicating that French iTunes track sales were 22.5% higher on average than they would have been in the absence of HADOPI. Similarly, album sales units rose by 42% in the control group but 67% in France, indicating that HADOPI increased iTunes album sales an average 25% per week in France.

What it found were five very pronounced peaks in the French searches that corresponded exactly with five (smaller) peaks in iTunes sales, and also to five well-defined external events: the launch of the Iphone 3GS and iPhone 4, and three Christmas seasons. The effect was so marked in France because it was starting from a lower base: according to the researchers, the average sales of iTunes in France were 450,000 per week, while in the UK they were 2,900,000 per week. So an alternative explanation for those impressive increases in sales is simply the uplift in iPhone ownership generated by new launches and the holidays in an immature market with plenty of room for growth.

The researchers do offer one other piece of evidence for the uplift in sales being due to the crackdown on piracy:

EMI surveys of French citizens show that that Rap and Hip Hop are the most heavily pirated genres, even relative to popularity in legal sales channels. While Rock and Pop experience average levels of piracy, the data also indicate that genres such as Classical, Christian, Folk, and Jazz experience significantly lower levels of piracy.

Therefore, they argued, if the increase in sales were due to reductions in piracy, they would expect "the increase in Rap sales to be larger than that for Rock and Pop and the increase for Classical, Christian, etc. to be quite low." And that is precisely what is observed. Conclusive proof? Maybe not.

As the Le Monde analysis points out, another explanation is that many recent iPhone purchasers are younger people, who are generally the most interested in acquiring the latest technology as soon as it comes out. And younger people, by and large, listen to more Rap than Classical or Christian music, which would explain the difference in the increase across genres.

Spending so much effort here on exploring one research report might seem excessive, but it matters. The IFPI is already branding this supposed increase in digital music sales -- quantified by the researchers at $18.6 million annually for France -- the "HADOPI Effect". In the months to come, you can bet that the recording industry's representatives and lobbyists will be visiting governments and showing them this "proof" that three-strikes really "works" -- and demanding they follow suit to "protect" the artists.

What's ironic is that the IFPI report spends many of its pages discussing a much more sensible way of reducing unauthorized sharing: offering high-quality music streaming services instead, as recent market research from Scandinavia indicates. Unfortunately, the recording industry is so obsessed with punishing pirates that it can't see that its future lies in promoting innovation, not legislation.

from the better-late-than-never dept

One of the most important aspects of the UK's Hargreaves Report was that it called for copyright policy to be based on evidence. It also noted that so far that simply hadn't been the case, and that practically all of the so-called "studies" used to justify laws in this area came from the copyright industries, with missing or dubious methodologies.

The French three-strikes scheme known as HADOPI (actually the name of the government agency that oversees its implementation) is a perfect example of such dogma-based legislation: no research was done into how files were being shared or even whether they did any harm (there's a fair amount of evidence that file sharing increases sales).

So it's interesting to see HADOPI putting out a call for some research into streaming sites (original in French):

The commissioned study focuses on an economic analysis of streaming sites and direct download where illegal practices are the most common, offering cultural property in the areas of music and video.

This new interest in streaming sites is presumably a consequence of Nicolas Sarkozy's announcement at the recent Forum d'Avignon that "we have to tackle the streaming web sites." It's certainly welcome that HADOPI is doing some research before it draws up its proposals in this area; but shouldn't it have done the same with the original three-strikes scheme?

Report to Congress- The Intellectual Property Enforcement Coordinator shall, not later than 6 months after the date of the enactment of this Act, submit to the Committees on the Judiciary of the House of Representatives and the Senate a report that includes the following:

(1) An analysis of notorious foreign infringers and a discussion of how these infringers violate industry norms regarding the protection of intellectual property.

(2) An analysis of the significant harm inflicted by notorious foreign infringers on consumers, businesses, and intellectual property industries in the United States and abroad.

Again, it's good that some research into that "significant harm" will be carried out, but shouldn't that come before the legislation is drawn up and enacted, not after it?

from the out-of-the-frying-pan-into-the-fire dept

As a recent Techdirt post noted, France's HADOPI "three strikes" policy has effectively criminalized vast swathes of that country. Despite widespread opposition, the law was pushed through in 2009 by the current French President, Nicolas Sarkozy, as one of his pet projects - it's probably no coincidence that he is married to a pop singer.

Sadly, the damage to online users' civil liberties caused by HADOPI's approach of guilt upon accusation is not limited to France: variations on the "three strikes" law have appeared in the UK and New Zealand, and other countries are flirting with the idea of introducing something similar. In addition, Sarkozy used the G8 meeting in Paris this year to call for the "wild west" of the Internet to be regulated  which presumably means passing even more copyright-friendly laws around the world.

The French Socialist party's newly elected presidential candidate, Francois Hollande, would score a landslide victory over Nicolas Sarkozy if the election was held tomorrow, according to an opinion poll.

The survey  the first since Hollande, 57, was nominated as the Socialists' official candidate  gave him a crushing 62% of votes against just 38% for the incumbent in the final round of a two-round vote.

With seven months to go before the presidential elections next April and May, anything could happen. But the poll, carried out by CSA and published on Wednesday, shows a level of support never before achieved by a Socialist candidate.

As that points out, there's still a quite a while to go before the elections, and so Hollande's election to the Presidency is by no means certain. But given his unprecedented showing at this stage it's worth looking at what his position would be on HADOPI if he were to win.

To be sure, they contain some good ideas: encouraging more "legal" online music services by making it easier for startups to license music from major record companies, and proposing the creation of a new "remix right". Most importantly, they will remove the threat of connections being cut if people are accused several times of downloading copyrighted material. Sadly, though, Hollande aims to keep one key aspect of HADOPI  its surveillance of users:

maintain the mechanism for detecting piracy and warning Internet users (for discussion: as a last resort, the user's file could be sent to the copyright holders for civil suits)

Clearly, if that point currently marked as "for discussion" were implemented it would give a powerful new weapon to the copyright industries to deploy against those accused of downloading or sharing unauthorized copies. It would probably cause even more of the shake-down schemes we have seen elsewhere to spring up  with the added twist that the copyright holders would have access to the user's connection records. That's clearly a dreadful prospect in terms of preserving people's privacy online, and would be wide open to abuse.

If Hollande does indeed become the next President of France, let's hope that he doesn't follow in the footsteps of his predecessor by bringing in such a bad Internet law.

from the but-of-course dept

We've seen similar scams for a few years now, but with the French three strikes administrators, Hadopi, sending out 650,000 first strike notices, it should come as no surprise that the scammers have jumped in to try to take advantage of people. They're sending notices to people pretending to be infringement notices from Hadopi. They ask people to click through to access their report. Following the link brings you to a cleverly faked Hadopi website, which asks for a registration code and provides the following instructions:

To get the access code by SMS: Send CODE to 81083. For the confirmation code by SMS: send CODE to 81015. To get the access code by phone: call the following number: 0899 230 141. Confirmation code by phone: call the following number: 0899 230 148.

And that's where the scam part comes in. The numbers are apparently premium access numbers, meaning that sending those text messages will end up costing quite a bit. Pretty sneaky. Yet another example of the kind of collateral damage created when you set up systems that treat people as guilty without any hearing or trial. It leaves itself wide open for abuse from scammers.

from the crimininalizing-an-entire-country dept

The latest stats coming out of France's HADOPI "three strikes" (really three accusations) policy are really quite stunning. Most of the focus is on the fact that 60 ISP account holders have received their third strike, and now await to see if they'll be fined and/or kicked off the internet without ever having actually been convicted of copyright infringement. But, to me, the much more interesting numbers are the first and second strike numbers. An astounding 650,000 people have received "first strike" notices, with 44,000 of those receiving a second strike as well. Those are huge numbers. It makes you wonder, at what point do those in power begin to recognize that if so many people are engaging in this, there must be some sort of better solution.

The entertainment industry loves to call infringement "theft," but I don't think anyone would argue that 650,000 people are running around France stealing things out of stores. And that's because people inherently recognize that there's a massive difference between stealing a physical product, such that there's one less of it, and listening to a song that they like, where nothing is removed for anyone else. When a huge percentage of your population is accused of breaking the law, the problem is not with the people... but with the law.